What’s the relationship between price and value? Pricing a product or service is often a fraught endeavor, especially for entrepreneurs and innovators in burgeoning industries in which price history or competing products may not provide a solid reference point. Determining the price of a new product requires determining its perceived value to consumers. However, this is rarely a clear-cut decision due to the many factors that influence consumer decision-making.
Pricing strategy, a discipline shared by entrepreneurs, marketers, psychologists, and economists alike, offers several guideposts that help determine value for a new (or improved) product. Going beyond the determination of value, pricing strategy also considers the psychological impact of price on consumer’s perception of that value.
While I was reading the other evening, I came across a tremendous metaphor. Conner Forrest, a writer for TechRepublic, equated admitting your own business’s failures to calling your own child ugly. No one wants to admit that their ideas aren't all that revolutionary or innovative. Acknowledging flaws in our products — ones we have built, invested in, and grown — can be a painstaking process.
However, our success is often defined by how well we handle failure. Not one successful person has achieved their goal without encountering several setbacks and learning experiences along the way. It's certainly difficult to feel like we're on the road to success in the face of a languishing product, but we can refocus our efforts to learn why our product is failing and how we might push it through to market success.
Let's take a look at a few ways to accomplish this: